London: Share markets made broad gains on Wednesday after China reported economic growth a touch above forecasts and another low Eurozone inflation reading spurred speculation about the European Central Bank’s policy options.
China’s economy grew 7.4 per cent in the first quarter, from a year earlier, pipping forecasts of 7.3 per cent and dashing speculation beforehand that growth would be nearer 7 per cent after a string of recent soft numbers.
The relief rippled through Asian markets, with Japan’s Nikkei ending up 3 percent - its biggest gain since February. Hopes of more Bank of Japan stimulus also helped.
Bullish sentiment spread to Europe with the DAX and France’s CAC 40 both up 0.9 per cent and the FTSE 100
0.4 percent higher as mining companies — among the most sensitive to Chinese data — regained ground.
Italy and Spain also rallied, with Milan 2 per cent higher and Madrid up 1 per cent as both clawed back some of the 5 per cent they have lost over the last week.
“Our basic view is that it will be a gradual slowdown (in China) rather than a hard landing,” Rabobank emerging market economist Christian Lawrence said.
While East-West tensions over Ukraine are keeping markets cautious, the mood had already been lifted by a late rally on Wall Street on Tuesday, largely thanks to some solid earnings.
Futures prices pointed US stocks resuming 0.3-0.5 per cent higher That was despite pre-opening bell news of more legal costs and lower earnings at Bank of America
Global giants Google and IBM also report later, while markets face another test when Federal Reserve Chair Janet Yellen speaks on monetary policy and the economic recovery at the Economic Club of New York at 1625 GMT.
Sentiment may get a lift if she offers reassurance that any rise in interest rates will come well after the Fed ends its asset-buying programme.
EURO FIGHTER
UK employment and earnings numbers sent sterling marching back towards its recent highs, as a five-year low in unemployment and a pick-up in wage growth reheated talk of a Bank of England rate hike early next year.
In the euro zone, where the European Central Bank is leaning in the other direction and talking about more rate cuts and unconventional policy, inflation was confirmed at a meagre 0.5 percent in March. .
The euro took little notice, however, rising 0.2 percent to $1.3837. There were also more bond gains for former trouble spots Italy, Spain, Portugal and Greece.
“It’s concerning (ECB President) Mario Draghi is already making comments about the strength of the euro,” said Bill Street, head of EMEA investments at State Street Global Advisors. “There is nothing he can do about it. I don’t even think aggressive policy intervention is going to work.”
Show of force
Capping the upbeat mood were mounting risks in Ukraine after Russia declared the country to be on the brink of civil war and Kiev said an “anti-terrorist operation” against pro-Moscow separatists was under way.
In currency markets, apart from sterling, the majors were confined to tight orbits with the euro a fraction higher and the dollar edging up to 102.25 yen.
The main mover was the New Zealand dollar which took a spill after inflation registered a surprisingly low 1.5 per cent in the first quarter. That prompted markets to pare back expectations on how far and fast interest rates might rise there.
The kiwi fell to its lowest in more than a week at $0.8587 , and dragged down its Australian counterpart to $0.9359.
In commodities, gold was pinned at $1,303 an ounce, well off Monday’s peak at $1,330.90. It had tumbled about 2 per cent on Tuesday on heavy stop-loss orders placed by momentum traders as prices broke below the key 200-day moving average.
Benchmark Brent oil rose 70 cents to a five-week high of $110.06 on developments in Ukraine and the China data, while US crude futures were up a dollar at $104.7594.
“The situation in eastern Ukraine has deteriorated in the past couple of days,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said. “And no one is pricing in economic sanctions.”
